SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of The Securities
Act of 1934
Date of Report (date of earliest event reported): June 15, 1998
Mallon Resources Corporation
(exact name of registrant as specified in its charter)
Colorado 0-17267 84-1095959
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
999 18th Street, Suite 1700, Denver, Colorado 80202
(address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (303) 293-2333
not applicable
(former name or former address, if changed since last report)
Item 5. Other Events
Mallon Resources Corporation (the "Company") issued the following
press release, dated June 15, 1998, the text of which follows:
Denver, Colorado -- Mallon Resources Corporation (Nasdaq:
"MLRC") today announced that it has increased its 1998 capital
spending budget to $36 million, an increase of $11.3 million over
the $24.7 million capital spending budget it announced in March.
Mallon said it took the action in order to capitalize on the
success of its East Blanco Gas Project in northwest New Mexico's
San Juan Basin.
To accommodate increases in productive capacity at East
Blanco, Mallon will substantially increase spending on project
plant and facilities. The Company's gas processing plant, which
currently has the capacity to process 14.5 million cubic feet per
day (Mmcfd) of natural gas and was budgeted to be increased to 24
Mmcfd by the end of 1998 under the earlier program, will now be
increased to 50 Mmcfd. In addition, the Company will expand
gathering systems and pipeline connections to accommodate increased
volumes. The increase in capital spending on infrastructure at
East Blanco is designed to maximize long-term growth in reserves,
production and cash flow. The new capital budget also includes
funds to drill five test wells by year-end on the 39,360 acres of
additional East Blanco land that the Company recently acquired from
the Jicarilla Apache Tribe.
The Ojo Alamo Formation at approximately 3,200 feet will
continue to be the primary focus of the Company's 1998 drilling
program at East Blanco. However, Mallon recently recompleted its
first natural gas well in the Nacimiento Formation at East Blanco
at a depth of approximately 2,600 feet. The well, which tested
over 700 mcf per day, identifies the Nacimiento as a potentially
important new productive horizon. This discovery, combined with
the Ojo Alamo's significant potential and the recent substantial
increase in the Company's East Blanco acreage position, convinced
the Company that additional resources should be dedicated to
development of the East Blanco project. The favorable results from
the Ojo Alamo drilling and the funds expended to test the
Nacimiento and other potentially productive formations are expected
to result in higher yearend reserves than in the Company's earlier
projections.
As part of its shift in capital spending, Mallon will also
defer substantially all of its scheduled 1998 oil drilling in
southeast New Mexico's Delaware Basin. This decision reflects both
the capital needs of the East Blanco Gas Project and currently
depressed oil prices. As a result of this deferral in its oil
activities, the Company's overall production for 1998 is likely to
be somewhat lower than earlier forecast.
George Mallon, Chairman and President of Mallon Resources,
said, "We are very excited about our East Blanco Gas Project.
Increasing our capital spending there is well warranted, even in
light of prevailing low commodity prices. The more we work the
East Blanco area, the more we believe that the San Juan Basin will
provide Mallon with years of reserve and production growth. This
is the key factor behind our decision to shift capital from
drilling oil wells to gas project drilling and facilities
expansion. This shift will slow our oil production growth for
1998, but, by deferring our oil drilling until a better pricing
environment exists, we expect to enjoy better rates of return when
our locations are finally drilled. In the interim, the projected
returns on our increased gas project spending are very attractive."
The foregoing information contains forward-looking statements
and forecasts, the realization of which cannot be assured. Actual
results may differ significantly from those forecast. Inaccurate
geologic interpretations, the volatility of commodity prices,
unbudgeted cost increases, unforeseen delays in operations, and
operations that prove less successful than anticipated are risks
that can significantly effect the Company's operations. These and
other risk factors that effect the Company's business are discussed
in the Company's Annual Report.
Mallon Resources Corporation is a Denver, Colorado, based oil
and gas exploration and production company operating primarily in
the San Juan and Delaware Basins of New Mexico. Mallon's Common
Stock is quoted on the Nasdaq National Market tier of the Nasdaq
Stock Market under the symbol "MLRC."
Signatures
Pursuant to the requirements of the Securities Exchange act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
Mallon Resources Corporation
June 16, 1998 __/s/ Roy K. Ross________________
Roy K. Ross, Executive Vice President
